A title search is required when buying property in Washington State. This process ensures that there are no issues such as unpaid taxes or prior claims on the land. Title insurance can protect buyers from these problems, as a title check may overlook them. Title insurance can provide the buyer with protection against claims or other issues, but an insurer could decide not to uphold their obligations to the insured. It’s important to hire a Washington real-estate lawyer who will protect your rights as a buyer, and ensure that you get a property with a clear title.
What is Title Insurance?
Title insurance protects both the borrower and lender during the process of real estate transactions. Property of all kinds, but especially older properties, have experienced multiple owners, alterations and zoning change throughout their recorded ownership history. The county or state should record these changes to provide a searchable history and to show that they have been settled. The majority of the time the title search will be done by an attorney or title search firm.
When a mistake or defect is discovered after the closing of the transaction, title insurance can be used. Some lenders include title insurance in the contract of purchase, but not all. Title insurance is not required by all lenders, but many do.
Title Insurance is Important in Real Estate Transactions
It is easier for both parties to complete a transaction when there are no prior claims or encumbrances on the title. Title insurance is a way to protect yourself against unforeseen claims or issues after the closing.
Title insurance will cover the costs of defending the homeowner against claims that are made after the closing. A prior claim can be due to mechanics liens or the heir of an ex-owner. It could also be because a mortgage from a previous owner is still in effect, or that a judgment has been issued against the property. These issues can cause financial loss and complicate the ability of the current owner to keep the property.
If you don’t buy title insurance, the buyer is responsible for the entire financial burden. A previous owner may have failed to pay their property taxes and the title search did not reveal this. As unfair as it may seem, the current owner is responsible for unpaid property tax. The problem will not go away until property taxes are paid. The current owner is responsible for finding the previous owner and figuring out how to get them pay the property tax. This is a problem that can be avoided by the current owner with title insurance.
Understand how title insurance works
There are two types of title insurance: lender’s and owner’s. The lender is protected by the lender’s insurance, while the buyer’s insurance is purchased by the seller. Lender’s insurance is most common, but sellers can offer the policy to buyers as an incentive.
Title search is required to ensure that the title of the property is clean or clear. Unclear titles are called dirty titles, and this is why it is important to search public records. Some properties have been owned by multiple people over the course of a century. This can cause records to be lost or obscured. Unpaid property taxes, Medicaid liens, unpaid loans and improperly allowed construction can all tarnish the title of a younger property.
Title Insurance Disputes: What Happens?
When there is a problem with the property, or when the insurer does not act in accordance with the policy, title insurance disputes can arise. Washington State title insurance disputes can include:
- Land disputes
- Problems with the boundary of the property.
- Dirty titles transferred without clearing the issue beforehand.
- Disagreements over the amount promised in insurance compared to what is delivered.
- Inability to pay benefits
Title disputes are also affected by state laws. Washington courts tend to take the buyer-beware approach and side with sellers when it comes undisclosed title defects. The seller will not be held responsible for an undisclosed problem or issue that is affecting the property. It’s the responsibility of the buyer to know about it before the closing. This isn’t something that is instated by state law but it can be a difficult position to overcome in court.
All of this means that a buyer must do due diligence on the property before they close. Due diligence involves checking property records, tax records and court records to see if a title is clear. This is usually done by those who are doing title research. However, they may not be thorough enough or miss areas that should be searched. As part of the closing process, retaining a lawyer with experience in title research can protect you from a defective title or a title insurer that fails to perform.
How a real estate lawyer can help with a title insurance dispute
Real estate lawyers are familiar with the Washington State real estate laws and know where to look when a title may have issues. A real estate lawyer can protect you from a title insurer that refuses to do its job. Our team of real estate lawyers at Dickson Frohlic Phillips Burgess is ready to assist you and ensure that your rights as a purchaser are respected. Our attorneys are available in offices located in Seattle, Tacoma and Olympia. Contact us in our Seattle office for assistance with a smooth transaction.
The article Navigating Title Insurance for Seattle, WA Real Estate Deals first appeared on Attorney at Law Magazine.